The Hindu Business Line : Subsidy: Urea units plan output cut

DOMESTIC urea manufacturers are contemplating reducing production. This is because of the Centre's apparent reluctance to take on additional burden in the form of fertiliser subsidy during the current financial year.

In a communication to the Government, the Fertiliser Association of India (FAI) has stated that if domestic urea manufacturers did not produce during the November 2004-March 2005 period, the total subsidy outgo would shoot up to Rs 6,779.12 crore for the five months. This is so because in that case, the Government would have been forced to import the entire urea requirement. But since it is being produced domestically, the total additional subsidy on account of urea only would be comparatively lower at Rs 3,697.60 crore.

According to sources in the fertiliser industry, urea manufacturers had been continuing production and incurring losses on expectations that eventually the Government would clear the additional subsidy bill. But with the Finance Minister, Mr P. Chidambaram, tightening the purse strings, the industry is seriously considering cutting down production.

The Chairman of one of the large fertiliser companies, who did not wanted to be named, told Business Line that "there is already signs of scarcity in many markets. Two Chief Ministers had celled me up personally to ensure speedy disposal of consignments."

The overall situation in the fertiliser situation and its availability had been grave this year right from the beginning. Initially because of the elections, no decision could be taken on the imported price of rock phosphate and muriate of potash thereby affecting the production of di-ammonium phosphate. Right now, the Government is still undecided over increasing the subsidy on single super phosphate and linking it to input costs.

And now the problem has hit urea, which is the most important fertiliser. Fertiliser subsidy as per the Budget estimates stood at around Rs 12,600 crore. But increased input cost has raised production cost and an additional amount of around Rs 4,000 crore would be required.

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